Management of NPL Payment

Chart: Management of Defaulted Credits and Subrogation

Brief Explanation

1. The SME fails to repay the loan or its credit standing deteriorates.

2. After being aware of the default of the loan or deterioration in credit standing, the financial institution (FI) should notify the Taiwan SMEG within a period of two months.

3. The Taiwan SMEG puts the overdue guarantee case under monitoring.

4. The FI takes legal actions and/or other collection measures to recover the overdue loan.

5. The FI applies to the Taiwan SMEG for prepayment as indemnity reserve.

6. After the Board of Directors approves the application, the Taiwan SMEG makes prepayment to the FI.

7&8. After the prepayment in subrogation is made, any recovery should be repaid to the Taiwan SMEG according to the ratio of guarantee coverage.

9. The FI uses the prepayment to write off the non-performing account.

10-1. After making the prepayment, the Taiwan SMEG entrusts the FI to exercise the right to recover the prepayment in subrogation.

10-2. The FI strives to recover the prepayment in subrogation.